This report profiles Thailand’s banking industry, covering market data and trends all the way through June 2014. The report also highlights leading players in the sector including Siam Commercial Bank PCL, Bangkok Bank PCL, Kasikorn Bank PCL, Krung Thai Bank PCL, and Bank of Ayudhya PCL.

The operating performance of Thai commercial banks as a whole in 2013 expanded, despite showing a little slack from the previous year due to the internal political unrest and lower than expected economic growth because of the deceleration in investment and consumption. Thai commercial banks have been growing steadily because of the expansion of up-country provinces economy and urbanization trend; the investment to support business opportunity in the upcoming AEC market in 2015; and the first car tax rebate measure that continued to the first half of 2013.

Total assets held by financial institutions in Thailand stood at THB 14.14tn as of April 2014, an increase of 5.9% y/y. Commercial banks represented 75.9% of the banking industry, with Bangkok Bank remaining the key dominant player in term of total assets. Meanwhile, banking loans grew by 5.3% y/y to THB 12.42tn as of March 2014. This increase mostly stemmed from SMEs loan expansion, although at a slower rate in tandem with economic contraction which prompted loan-to-deposit ratio to decline to 109.6% in March 2014, from 113.4% in the same period last year. Nonetheless, banks generally have had ample buffer capital for expected losses as capital ratios remained strong in Q1/2014, signifying a solid financial position for banks in Thailand.

Going forward, credit card lending will continue to register strong growth as a result of aggressive card promotional campaigns. Also, further consolidation is expected amongst the domestic financial institutions to enhance efficiency amid intense competition. Commercial banking business in 2014 is expected to continue to fare well with the distinctiveness of stability, strong capital funds and sound asset quality. However, downside risks stem from delays in government investment and fragile confidence within the private sector.

Key Points:

• The Thai banking system recorded a higher net profit of THB 50.5bn and ROA of 1.26% in Q1/2014 with strong capital position and assets in good level.

• Loan quality slightly deteriorated, evidenced by a marginal increase in non performing loan (NPL) ratio to THB 280bn or 2.3% in Q1/2014.

• In 2014, big banks should outperform small banks in terms of loan and earnings growth, while most banks should report higher net interest margin (NIM) on lower funding costs.